The Ledger and Trial Balance

Syllabus tag: KCSE | Business Studies | Form 3 | Topic 22 Ledger and Trial Balance

Lesson objectives

By the end of this topic, you should be able to:

• Explain the double entry principle and the ledger.
• Classify accounts as personal, real or nominal.
• Describe the types of ledger kept by a business.
• Extract a trial balance and explain its purpose, limitations and errors.

Summary

Every transaction has two effects, so it is recorded twice — once on the debit side and once on the credit side. Accounts are kept in ledgers and classified as personal, real or nominal. A trial balance lists all balances to check that debits equal credits — but it cannot detect errors that affect both sides equally, which is its essential limitation.